The United States

The Promise of Strife to Come

Land of Promise: An Economic History of the United States
by Michael Lind
Harper, 2012, 586 pages, US$29.99

A growing number of books offer ideas on how best to bring America’s Great Recession to a close. One of the most notable is Michael Lind’s Land of Promise. A prominent advocate for an activist industry policy, Lind is best known as a contributor to the online magazine Salon. He also co-founded the New America Foundation, which receives funding from some of the largest donors to the Democratic Party. Though formally an economic history, Land of Promise is also a carefully argued contribution to the debate about industry policy, government intervention and the fate of economic liberalism.

Land of Promise roams across American economic history from colonial times to the Bubble Economy, blending the insights of Joseph Schumpeter on creative destruction and the policy prescriptions of Alexander Hamilton. Lind demonstrates how the American economy evolved under pressure from successive waves of technical and entrepreneurial change, each wave creating a crisis in previously satisfactory political arrangements that suddenly became archaic and counterproductive. As Lind argues: 

despite the formal continuity of its political institutions, the United States has gone through two or three regimes or informal “republics” … each originating in a prolonged crisis—the American Revolution and its aftermath, the Civil War and Reconstruction, and the Great Depression and World War II. It remains to be seen whether the global economic crisis that began in 2008 will mark the end of the Third American Republic and the gradual construction of a fourth republic by the 2020s or 2030s.

Lind has a prodigious talent for hunting down forgotten anecdotes, unpublished pages of memoirs and neglected or forgotten policy advice. This alone will make Land of Promise rewarding reading for history buffs. It is typical of his thoroughness that he rescues forgotten economic thinkers such as Jean-Baptiste Gribeauval, Honoré Blanc and Louis de Tousard from obscurity and recognises their significance in inspiring the early American military engineers who pioneered defence-related mass production over a century before Henry Ford and his Model T.

Lind celebrates the regulated capitalism of the New Deal of Franklin Roosevelt and his successors (up to and including Richard Nixon) which enabled the emergence of a prosperous mass middle class. He is keen to see the USA make a decisive break with the recent era of deregulation. This deregulation, alongside the mercantilist assault on US industry by Japan, South Korea, China and others, is blamed for the deindustrialisation of the United States. Land of Promise places this mercantilist assault in the context of the wider geo-strategic situation:

Having been strained by Japanese and German export-oriented mercantilism, the economic order of the Pax Americana was finally shattered by the attempt to admit post-Communist China to the system on terms similar to those that had been offered to the defeated Axis powers. The form that globalization took severed the link within the United States and other nation-states between domestic mass consumption, domestic investment, and domestic economic growth. On both sides of the Pacific Ocean, wages failed to rise to track productivity growth. Wage-led growth in the United States was sacrificed to debt-led growth, while in China, wage-led growth was sacrificed to investment-led growth. When debt and investment dramatically outstripped wage-based aggregate demand, a painful readjustment became inevitable.

While this assessment is true, it is not the full truth. The underlying global trends that now disturb middle-class America were evident long before the Cold War. The economic and political effects of the spread of Western science to rivals in Asia and beyond were anticipated by Oswald Spengler in the 1920s. Soon after that, the possibilities for a truly global economy, organised to achieve the most rational exploitation of the world’s resources as possible, became even clearer across every corner of the political spectrum. As a fictional apologist for mid-century fascism put it in Arthur Koestler’s Arrival and Departure:

What we really believe is that with the rapid development of science and technique, mankind has entered the phase of its puberty, a phase of radical, global experiments … Wipe out those ridiculous winding boundaries, the Chinese walls which cut across our fields of energy: scrap or transfer industries which were needlessly built in the wrong areas where they are not required … shift the population of certain districts, if necessary of entire nations, to the spaces where they are wanted and to the type of production for which they are racially best fitted …

Take out the now-incendiary reference to race and you have a workable description of globalisation and the concomitant flows of capital, employment, goods and population.

Land of Promise insists that the critical challenge for America is to rebuild manufacturing capacity currently lost to Asian and European rivals, if only to prepare for the day when the dollar ceases to be the global reserve currency, when the United States will have to pay for its imports with exports. Lind does not argue on behalf of either systemic protectionism or mercantilism, but he makes a critical recommendation:

The most important reason for maintaining a world-class industrial base is national security … While enjoying the benefits of trade with other great powers, [the USA] must ensure that it does not become overly dependent on them for essential manufactured goods or raw materials. In the decades ahead, American defense strategists should devote more attention to ensuring that the United States has adequate manufacturing capacity in the event that one or more other great powers becomes a military rival.

The present situation, with its toxic imbalances in trade and finance, cannot endure for much longer. Since the military-industrial complex still provides America with a comparative advantage over rivals in weapons development and manufacture, and the military remains the most significant cluster of American institutions which routinely operate at a high standard, Lind’s thinking may yet find a warm reception. Though Lind does not acknowledge it, the former Chairman of the Joint Chiefs of Staff, Admiral Michael Mullen, has expressed strong concerns over America’s deteriorating capacity in naval ship-building and missile fabrication. Such views lend credibility to Lind’s case for a strategic approach to retaining and developing a workforce with high-tech skills. Tellingly, Lind does not drift into investigating the finer details of just how such a strategic approach would be developed or maintained under present conditions. He resorts to repeating the advice of George Washington, who held of a free people that “their safety and interest required that they should promote such manufactures as tend to render them independent of others for essential, particularly military, supplies”.

The prospects for a successful national reinvention of the kind Lind seeks appear poor at the moment. Obama is no Roosevelt redux. While Roosevelt was a truly national leader who worked with a coalition drawn from the widest swathe of American society (from leaders of industry to trade unionists) and imposed sacrifices from the capitalists that he was attempting to save, Obama appears to be little more than a regular product of the Chicago Machine. In office he has certainly resembled the leader of a triumphant faction: inciting racial resentments, repeatedly taunting opponent constituencies, and neglecting to investigate alleged cases of voter intimidation by his supporters.

Obama’s rhetoric about education, infrastructure and green technology only convinces those who choose to ignore the fact that the public sector is a jobs-trust for supporters of the Democratic Party, that minority “set-asides” in public tendering and contracting have created a crony-capitalist class which adds little or nothing to national income, productivity or innovation, and that the most conspicuous beneficiaries of publicly financed green technology appear to have funded Obama’s campaign in 2008.

Pace the angry men of Fox News and the internet, Obama was never a Manchurian candidate. Rather, he is the first American president to follow the example of Hugo Chavez or the leadership of the ANC. He represents a class of left-leaning crony capitalists that uses dirigisme as a means of personal and caste enrichment, while relying on the electoral support of constituencies doomed to unrelieved hardship. Thus, Obama’s principal achievement has been to get Americans to support standard Third World politics.

Obama’s political career would have been impossible without the post-Kerner commission consensus that Mitt Romney’s father helped to establish. George Romney was governor of Michigan during the uprisings in Detroit in the late 1960s, after which he began taxing the middle and working classes to pay the transfer payments that have enriched the would-be leaders and spokesmen of the dangerous classes, much as his ancestors once paid Danegeld to Halfdan Ragnarsson and Ivar the Boneless. During the recent election campaign Romney pointedly neglected to challenge this consensus—though this did not stop Joe Biden from warning African-Americans about Romney and Ryan: “They’re going to put y’all back in chains.”

Both grassroots Republicans (the so-called Tea Party) and the celebrated Reagan Democrats (millions of whom abstained from voting in the recent election), detest the de facto bipartisan consensus. They intuit that the transfer payments and shakedowns, the crony capitalism, racial “set-asides” and caste privileges such as affirmative action, are set to escalate beyond endurance now that mass immigration has tipped the balance of electoral power to the permanent advantage of the Democrats. In the absence of mass prosperity, such rent-seeking will be impossible to eradicate without serious controversy. So America is not set for renewal, but strife.

Considering all this, America’s present condition recalls an observation by a drinking buddy of Nero: si recte calculum ponas, ubique naufragium est: if you consider the reckoning correctly, shipwreck is every­where. Before long we shall see what is to be saved and what left behind.

Phillip Hilton reviewed Great Crises of Capitalism by P.D. Jonson in the July-August issue.

Leave a Reply